Marconi losses top £5bn

Tuesday 13 November 2001 00:00 BST

TELECOMS equipment group Marconi has reported a £5.1bn first-half loss, blaming an 'unprecedented' decline in its key markets. The group, which has shocked investors with profit warnings and thousands of job cuts, also all but ruled out a revival in its sector until 2003.

Sales slumped 19% to £2.58bn for the six months ended September. The loss, equivalent to £28m a day, was swollen by one-off costs and writedowns. It compares with a £66m loss the previous year. But even before one-off items and goodwill, Marconi lost £339m, compared with a £276m profit last time.

Marconi said trading in the first half was 'extremely difficult, with unprecedented declines in spending on network infrastructure'. It was not betting on an early revival. 'We have not anticipated any upturn for this year or next year in the markets,' chief executive Mike Parton said. 'If the upturn comes we will be very pleased but in our business plan we have not anticipated an upturn next year (the calendar year 2002).'

Market uncertainty had been exacerbated by the 11 September attacks in the US and Marconi could not give sales and operating profit forecasts for the full year. Its customers, the telecoms operators, have cut spending as they struggle to absorb the high costs of new mobile phone licences and to ride out an economic slowdown.

But Parton said new management was beginning to improve performance, focusing on cost-cutting and cash generation: 'We are very confident of weathering this downturn. We are positioning ourselves to ride out this downturn.'

The shares fell nearly 3% to 30.30p in early trade. They have fallen more than 95% since the start of the year, and traded at more than 1,250p just over a year ago.

Marconi's net debt increased to £4.28bn as at 30 September. But it recommitted itself to cutting debt to £2.7bn-£3.2bn by the end of next March. Taking recent disposals into account, debts were about £3.5bn.

The company wrote off £3.5bn in goodwill and fixed assets to reflect the deterioration in its business. In 2000, Marconi was still snapping up overseas businesses like US-based technology firm Mariposa Technology and Italian mobile radio technology firm Telit Networks SpA.

But this year Marconi has issued two profit warnings, slashed thousands of jobs and shed its top management in four months of upheaval. In September its shares were dumped from the FTSE 100 index of blue-chip stocks.

Marconi said it was in talks with its banks to refinance its loans and was 'assessing all options' for future financing. It said it was satsified it had adequate resources to continue as a going concern.

Lenders including Barclays and HSBC have been pushing to renegotiate an unused e3bn (£1.7bn) credit line to include covenants, to reflect Marconi's deteriorating fortunes. However, holders of Marconi bonds are resisting the inclusion of covenants as it could push them back in the queue for assets if the company collapses.